Clawing back tenant rights

By Terrie Lloyd

Last week, the media reported on a landmark court ruling, whereby the Kyoto District Court said that a landlord’s insistence on contract renewal fees (“koshinryo”) may violate the rights of the tenant. This is the first time such a case has been ruled in favor of the tenant.

In the case, the tenant was apparently told that there would be a contract renewal fee, but not why. Presumably, the agent thought that because the renewal fee is a traditional payment, dating back to post-war times when the government didn’t want returnee soldiers relocating en masse to the cities, they didn’t go into it in any detail. In any case, as a result of that oversight, when the plaintiff moved out several months after he’d paid the renewal and the landlord refused to refund the payment, the tenant took offense and took the landlord to court.

The basis for the lawsuit was the 2001 revised consumer protection law, which the court agreed had precedence over the tenancy law. In the ruling, the judge apparently commented that, “The reasons for charging contract renewal fees must be clearly explained to tenants and agreed upon between the two sides.”

Now before everyone starts hooting from the rooftops that it’s time for landlords to get some of their own medicine, it’s worth remembering that this is the exact same Kyoto District Court that in January of last year dismissed a very similar lawsuit. In that earlier case, the tenant also based his claim on the 2001 consumer contract law, where he said that renewal fees in the way they are currently notified and imposed, constitute a contract that “Unilaterally causes damage to the interests of consumers.”

I daresay that a lot of readers would agree with that statement.

It seems that the point of legal consideration by the two different Kyoto law court judges wasn’t whether the renewal fees are allowed under consumer law or not—they are, so long as the landlord or the agent explains clearly that the fees are part of the contract and that the tenant knowingly and willingly signs the contract. Rather, the consideration was all about whether the fee’s purpose was clearly explained—thus allowing the tenant to claim that he wasn’t fully informed and therefore permitting him to invoke the consumer protection law.

So, the requirement to pay rent renewal fees, as onerous as they are, has not gone away. It’s just now that it’s possible to claim ignorance to the rules, and use that to get your money back. This is not a strong step forward for tenant’s rights, but at least it’s a start.

As most readers would be aware, the renewal fees are not the only sticking point when it comes to renting Japanese apartments. There is also the non-refundable deposit and the “cleaning fees” to be deducted from that deposit when you move out. Most people who have moved apartments more than once have learned that very little of their 2-3 months refundable deposit will actually come back—a good reason, of course, why people don’t move so often.

I’ve heard a variety of opinions about whether tenants can fight the imposition of cleaning fees—especially if you’ve cleaned the apartment thoroughly enough that it doesn’t need much more polishing. Certainly you CANNOT not pay them, since the fees are generally taken out of the deposit paid when you first moved in. The general guideline, apparently is for a cleaning fee of 1,000-1,500 yen per square meter of apartment floor area—which for a 100,000-yen apartment might leave you with the grand total of just 50,000 yen from your original 200,000-300,000 yen of refundable deposit being returned.

Talking to a certain large rental agent for foreigners, I have heard that the situation is quite different in the non-Japanese sector. Largely because expat apartments tend to be bigger and more expensive to keep vacant, and because there is also a dearth of tenants, landlords are being much more flexible and cooperative. They are cutting deals that strictly Japanese-facing landlords would never dream of. The deals include no-deposit contracts, 3-6 months free rent on a two-year lease (just like B- and C-grade offices), and large price cuts of up to 50% discount.

But as I’ve noted, one man’s cloud is another’s silver lining. Word is that there are plenty of local foreigners and Japanese moving into the more fashionable districts in Tokyo right now—because they’re trading up into the gaijin apartments, but not having to pay much difference for all the extra space, appliances, and convenience.

Terrie Lloyd writes a weekly newsletter for entrepreneurs and business people about business and political opportunities in Japan.

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Latest 15 of 23 Total Comments Show All

bokudayo at 01:42 PM JST - 30th July

Actually, Coolasapool, you might be surprised. Tenants may have legal rights, but if they don't pay rent and think they can get away with it, they will come home one day to a changed lock and an empty apartment.

The police will not be of much help when the landlord explains that the contract was ended a few months before and that the tenant was completely faithful in paying rent until he moved out. And that returning 3 months later saying he still lived there was a surprise and slightly disturbing.

To the cops, the tenant would be a weirdo foreigner and they wouldn't pay him much attention.

The tenant would know he was up sh!t creek without a paddle and would have to meet the owner's terms - unless he hired a lawyer and spent a hefty sum of cash (hopefully he didn't leave his cash card and i.d. in the apartment!)

The owner can now rent out the unit to someone else and collect back rent. If the renter refuses to pay, dump his belongings and chalk the loss up to experience.

In my book, if you don't pay, you don't stay.
SimondB at 05:12 PM JST - 30th July

Renting in Japan is the pits. Got turned down in a place in Hiroo because I was a foreinger - problems with putting out the rubbish on the right day etc. Other places they wanted my (Japanese) wife to supply details of her Fathers position in his company etc.

Key money is the biggest rip off in Japanese rental market. It derives from the time right after the war when accomodation was at a shortage and landlords made people pay an exobriant price just to get in the door. that this custom should still continue in this day and age is an outrage.

Last place I had in Yokohama I could tell when I walked in that he had not let it for a while. Wanted two months Key Money. Told him I was not interested he called me and reduced to one month. Said no and eventually he said OK no key money. He needed me more than I needed him.

Likewise with "renewal fees". What the hell are you renewing? Tell your land lord that thanks, but I'll move on. He is then faced with replacing a regular paying tenant who caused no problems (and put the rubbish out on the right day) and going through the key money scenario again.

Perhaps, and maybe more than perhaps, renters should form a mass organisation that agreed that no-one in the organisation would pay key money or renewal fees. Surely it would have to grow - nobody could lose. Except exploitave land owners.

just say NO!
gaijintraveller at 07:23 PM JST - 30th July

Possession is nine tenths of the law. If you have paid your rent up to the day you move out, it is much harder to get your deposit back. If you withhold the last month or two rent and tell the landlord it will be paid when you get your deposit back, you are much more likely to get it back.
bokudayo at 09:28 PM JST - 30th July

And you guys wonder why foreigners have difficulty renting in Japan.
whitepocky at 11:37 PM JST - 30th July

And now we see the landlords struggling with low occupancy rates.

Reap what you sow fat cats!
kyoken at 11:51 PM JST - 30th July

Japan has a long history of avoiding change at all cost. This "victory" will soon be defeated by an "explanation" why contract extensions are necessary and a precondition to get the contract in the first place.
nisegaijin at 11:58 PM JST - 30th July

so can anybody post a good guideline for tenants to move? what to ask for as far as deals are concerned and what to say when moving out? how to refuse payment and ask for your deposit back? i've been in my place for over 5 years. there is some slight damage, but mostly just wear and tear that should be covered by depreciations. also, i don't understand why landlord is getting the security deposit, not the management company.
kokuryu at 03:23 AM JST - 31st July

Quite frankly I dont see much of a difference between what happens in Japan versus what happens here in the US. Very minor differences. I have been through these same scenarios, with slightly different names for the fees, here in the US. I have NEVER gotten ANY security deposit back - EVER - even after fulling cleaning and re-painting a place to have it look BETTER than when I originally moved in. As a matter of fact, two of the places I moved from CHARGED ME MORE after I moved out.
pointofview at 08:02 AM JST - 31st July

A couple of months back I found a place on line through an agency that said no fees ie. key money, gift money. When I got to the agency they said it would still cost 257000 to move in. Couldn`t believe it.
pointofview at 08:06 AM JST - 31st July

Doing general maintenance for wear and tear and keeping the building looking respectable should be included in the rent. If theres major damage thats a different story.
neganip at 09:31 AM JST - 31st July

although i dont usually take stands in this kind of a debate. I would like to officially despise that one broker that pretty much takes all gaijin for a ride. If I could I would form an organization to handle all the undercover abuse that they lump onto us because we dont have choices and dont speak the language as soon as we come into the country. They endear themselves to the landlords by "handling" us vermin as they like to think.
DeepAir65 at 10:17 AM JST - 31st July

I can't find it now but there is also a sliding scale on the wear and tear side of the deposits. Last year I moved out of a house that I had been in for over 5 years and I think legally they could have only held back something like 20% of the deposit.

The cleaning fees were written into the contract so not a lot I could do there but it was about 100,000 for a 100sqm house - our moving fees were actually cheaper than that!!!!

Full refund minus cleaning fees - result!
Richard_III at 11:59 AM JST - 31st July

Looked at a place the other day. Asking rent was 230,000. Landlord wanted reikin of 3 months + a deposit. That's 920,000 just to move house, before you've even bought any new furniture etc.

I wonder what displacement effect this has on the economy? Surely it is better for more tenants with have more money buying things that suit their individual needs, than all the money going to one landlord.

The place didn't have double glazing, no central heating, and was built in the 1980s.

This country really sucks.
quato at 09:47 PM JST - 31st July

Where are these gaijin apartments that are supposedly cheaper and larger than the Japanese ones? All the gaijin apartments I've seen were more expensive than the Japanese ones of equal size in the same neighborhoods. That's how they make up for the lack of move-in fees- by charging higher rent.
ninjaninaritai at 09:14 AM JST - 3rd August

Rule 1: Avoid the moving season (March-April)

Rule 2: Negotiate.

Rule 3: Have a Japanese seishain spouse.

Just moved to a 2K the other day. It's really tenant's market out there now. Negotiated away the key money. Didn't pay rent from we took it until we moved in (1 month). Only 1 month deposit. We could pick and choose between apartments, and they all seemed desperate to find a tenant. Same with the moving company, we had 3 men working for us for 6 hours for less than 40000 yen, they initially asked for more than 80000. The contract is very clear on what the deposit covers, and it is damage, not wear and tear. The problem is that the landlord is in possesion of the money. I've heard that the courts normally side with the tenant, the burden of proof is on the landlord. However, realisticly we won't go to court over one month rent (Is there a small claims court system here?). But threats are anyway free :)